Whether it is farmer suicides or food inflation, the way out suggested is often in increasing investments in improved technology to increase crop productivity and thereby improve farm incomes. Raising crop productivity will bring down the cost of production and thereby reduce food prices.
This is half the story.
Take the case of Punjab. A year after it launched with much fanfare the Rs 500-crore plan to diversify from paddy to maize and vegetables, the plan has misfired. "Farmers have not taken to diversification. They want to be assured of fixed returns. Farmers could take to growing hybrid maize with a yield of eight quintals per acre, but want minimum support price (MSP) for the same," G S Kalkat, chairman of the Punjab Farmers' Commission was quoted as saying in The Tribune (Sept 20, 2014). This is not the first time that Punjab farmers have spurned every move to diversify from wheat and paddy crop rotation, but what is significant is that the policy makers have not learnt any lesson. It is not improved technology that is hampering crop diversification but the failure to provide an assured income that is keeping the farmers away.
Meanwhile, the Netherlands has already set up three centres of excellence, one each in Kerala, Maharashtra and Punjab. Monsanto too has signed an MoU with Punjab Government to set up three centres of excellence for the promotion of cotton, vegetables and maize. A number of other centres of excellence are coming up in other States too.
What amuses me is that while Netherlands is pushing improved crop technology (read costly equipment and other farm inputs) in India, its own agriculture back home is surviving on massive farm subsidies. Let me make it very clear. The Netherlands is a global leader in agriculture not because of its sophisticated technology and high crop productivity but because of the massive farm support it provides to its farmers. Between 2000-02 as the reference period, the subsidies being paid to European farmers became an entitlement. Accordingly, Dutch farmers were paid a subsidy of Euro 1299 per hectare every year. This figure may have changed now but tells you how Dutch farmers have been a continuous beneficiary of direct income support.
In the European Union, as per the financial plan for 2013, the agricultural budget stood at roughly 40 per cent of the total budget, with an allocation for agriculture close to Euro 60 billion ($78 billion). This is a whole lot of money for a sector which does not even employ 5 per cent of the population.
As per www.foodsubsidy.org farmers in the Netherlands received a total of Euro 739,214,572 as direct income support between 1997 and 2012. The question therefore is that if Indian farmers were to raise crop productivity, which they can easily do even without the improved technology from the Netherlands, who will pay them the corresponding subsidies to keep them alive?
But that's not the question that worries Indian policy makers. They are more keen to bail out the Dutch companies, which are find it difficult to survive in The Netherlands. Lutz Ribbe, a member of the EU's agricultural commission and the conservation director the environmental organisation Euronatur had this to say: "The Netherlands, for example has reached its limits. The farmers' income aren't right anymore; the environment is collapsing. The big companies, which can't develop anymore, are leaving the Netherlands and are being welcomed with open arms in eastern Europe." (http://www.dw.de/eu-proposal-
I give you another example, this time from Denmark. Some years back I wrote in one of my articles: "If you are wondering as to why Indian pea producers are unable to competitively bid for processed foods in the global market, let us see how Denmark, for instance, manipulates the market and that too by truly following the WTO norms. Danish pea farmers do not benefit from price subsidies. Danish split pea processing companies do not benefit from processing and marketing aids. Danish pre-cooked split pea exporters do not benefit from export refunds. So obviously, you will think that they are very efficient producers and of course very competitive. But hold on.
Since pea farmers do not have to recover their full production costs from the sale price of the peas supplied to processing companies, the price at which pea is supplied to processing companies is substantially reduced. As a consequence, the price at which pre-cooked split peas is offered for sale is substantially below the prices that Indian pulse growers can offer. The provision of direct payments thus enables Danish suppliers of pre-cooked split pea to capture markets, which they would never have been able to supply in the absence of the aid payments.
Let me make it very clear. The comparative advantage that is cited by developed countries is actually built on agricultural subsidies. Withdraw the agricultural subsidies, there is no comparative advantage left for most of the crops, and I repeat, for most of the crops. That is why the mainline economists do not compare the cost of production of agricultural commodities but look invariably at the supply chain management." (Read my article: Hold economists accountable too. IndiaTogether. April 5, 2005. http://indiatogether.org/
Agriculture is not simply a play of technology. It requires supporting policies to make it click. Even the Green Revolution wouldn't have been successful if the Indian government had not provided two critical policy planks. Assured price to farmers through the mechanism of MSP and the assured marketing of the surplus produce by setting up a procurement structure is what made high-yielding varieties perform and deliver. The rest is history.
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